When it comes to business success, growth is often seen as the ultimate goal. Increasing revenues, expanding market share, entering new markets — these are the metrics by which many companies measure their progress. But as renowned strategy expert Michael Porter argues in his influential Harvard Business Review article “What Is Strategy?”, the pursuit of growth can often undermine the very thing that is essential for long-term prosperity: a clear and distinctive strategic position.

At its core, strategy is about making choices. It’s about deciding what a company will do differently from its competitors, and what trade-offs it will make to establish a unique and valuable position in the market. A company with a clear strategy performs a set of activities that are different from rivals’, or performs similar activities in different ways. This allows the company to deliver a distinctive mix of value to a specific set of customers.

The problem, Porter contends, is that the pursuit of growth often leads companies to compromise their strategic positioning. In an effort to expand, companies are tempted to broaden their product offerings, imitate competitors’ features and services, and chase after every possible customer segment. But in doing so, they risk blurring their uniqueness, reducing the fit among their activities, and ultimately eroding their competitive advantage.

Porter dubs this phenomenon “the growth trap.” He argues that when companies stray too far from their core strategic position in pursuit of growth, they often find themselves stuck in the middle, trying to compete on multiple fronts without a real competitive advantage in any of them. They may achieve some short-term gains in revenue or market share, but at the cost of long-term profitability and sustainability.

The antidote to the growth trap, Porter suggests, is not to abandon growth altogether, but to pursue it in a way that deepens and reinforces a company’s strategic position. Instead of chasing every opportunity, companies should look for ways to expand that leverage their existing strengths and capabilities. They should seek out new customers, markets, or product offerings that fit with and enhance their distinctive value proposition, rather than diluting it.

This might mean turning down certain opportunities that don’t align with the company’s strategy, even if they promise short-term growth. It might mean investing in features or services that are hard for competitors to imitate, rather than just matching what others are doing. It might mean focusing on better penetrating the customer segments where the company is truly differentiated, rather than trying to be all things to all people.

Developing and maintaining a clear strategic position is not easy. It requires discipline, focus, and a willingness to make hard choices and trade-offs. But as Porter argues, it is the key to achieving sustainable competitive advantage. Companies that chase growth at the expense of strategy may enjoy fleeting success, but they are unlikely to build enduring value.

For investors, this serves as an important reminder to look beyond surface-level metrics like revenue growth when evaluating a company’s prospects. A company that is growing rapidly but lacks a coherent strategy may be a riskier bet than one with a more moderate growth rate but a clear and defensible market position.

If you’re keen to dig more into this, we can highly recommend this lecture by Michael Porter from 2012.

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